Fur flies in Stop `N' Cash dispute

Potentially at stake is the survival of a Kitchener-based firm whose 50-plus chain of stores generated $70 million in revenue last year, and is now fending off an upstart challenge in the form of Cash Connexion, launched by a former franchisee.

The Toronto Star
October 3, 2004

Fur flies in Stop ‘N’ Cash dispute
Money laundering, conspiracy among charges levelled. 50-store chain's survival could be at stake, experts say.
Jim Rankin and Nicole MacIntyre

The Stop ‘N’ Cash payday loan company has won a court injunction against former key players, barring them from communicating with franchisees or talking to the media.

The injunction comes amid a swirl of allegations, denials and counter-claims filed in Superior Court of Ontario.

Potentially at stake is the survival of a Kitchener-based firm whose 50-plus chain of stores generated $70 million in revenue last year, and is now fending off an upstart challenge in the form of Cash Connexion, launched by a former franchisee.

While none of the parties involved in the dispute agreed to be interviewed for this story, the allegations filed in court point to much turmoil and acrimony in the past several months.

Head office is being accused of misusing franchisee funds earmarked for advertising and promotion.
Administrative staff recently resigned. The accountant quit and key players were let go or locked out.
There are allegations, coming in affadavits from three former employees, that headquarters was used to launder money.

The company, for its part, claims there's no evidence of wrongdoing, and alleges the former officer is holding on to $1 million of Stop ‘N’ Cash's money.

None of the allegations has been proven in court. Stop ‘N’ Cash also faces other, significant challenges.
On the heels of a proposed class action lawsuit launched in March, alleging the company charges criminal interest rates and that an insurance fee it charges is a sham, one franchisee has converted his three stores to Cash Connexion, while five others have stopped paying royalties.

As part of a Star series on Canada's payday loan industry in June, a reporter took out loans at a dozen Toronto payday stores and found the fees and interest charged on a two-week loan, when combined and calculated on an annual basis, ranged from 390 per cent to 890 per cent.

Consumer advocates have said the fees and interest charged on payday loans are exorbitant, and trap vulnerable borrowers in a cycle of debt.

Out of 12 stores sampled, Stop ‘N’ Cash was the most expensive.

In late August, following investigations into a death and disability "insurance" fee charged on Stop ‘N’ Cash loans, regulators in Ontario and British Columbia, home to one store, slapped headquarters and a related off-shore insurance company with orders to immediately stop conducting insurance business.
At issue was the 25 per cent insurance fee attached to loans, 97 per cent of which ends up as revenue for stores.

The company is fighting the order, but has since changed its business model in an attempt to appease the regulators.

Stop ‘N’ Cash was founded six years ago by former carnival ring-toss game worker Tim Voisin and partner Clive Metcalf, a Vancouver businessman who has also worked in the carnival industry.
In a statement of claim filed in July, Stop ‘N’ Cash alleges Voisin and other former key players have been "involved in a conspiracy" to set up a competing payday loan business, and have made attempts to lure franchisees away.

In response to questions from the Star, a Stop ‘N’ Cash lawyer, in a letter, questioned the credibility of those who have left or been fired and are now being sued by the company, and who are also the subject of court orders forbidding them from talking to the media about the company.

The lawyer noted that the defendants, who have levelled allegations in affadavits, have failed to attend cross-examinations "where the validity of their allegations could be tested."

Stop ‘N’ Cash, for its part, alleges company co-founder Voisin removed $540,000 from the business, without the knowledge of his partner Metcalf, and, according to an affidavit sworn by an ex-chief financial officer, had also used headquarters to launder money.

Waterloo police told the Star they haven't received any complaints of that nature.

Voisin was locked out of headquarters in July and is being sued by the company. Metcalf has assumed control of the company.

Voisin, citing the gag order, declined to comment. He did deny laundering money and told the Star he has no business connections to franchisees that have splintered off from Stop ‘N’ Cash.

The man levelling allegations of money laundering, in his court filing, is Dave Westlake, the firm's former chief financial officer, who is now involved with Cash Connexion.

Stop ‘N’ Cash alleges Westlake left with close to $1 million of its money, which was held in a personal bank account he set up to protect the company from creditors.

Police are investigating the company's claims. Westlake has filed an affidavit in which he itemizes $800,000 worth of company expenses covered by money from that account, and a further $200,000 he states is owed to him under a contract agreement.

Later this month, Stop ‘N’ Cash lawyers are scheduled to appear before Ontario's Financial Services Tribunal for a hearing into the order that prevents the company from conducting insurance business in the province.

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Risks: Lawsuits, class action, Advertising fund put into general franchisor's coffers, Gag order, court-mandated, Can’t talk to media, Money laundering, Stopped paying royalties, Raining litigation, Conspiracy, Canada, 20041003 Fur flies

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